Interviews with Philippe Aghion and William Bourdon

Democracies must be able to promote economic innovation. In France, however, the media and the judicial system are not independent from the state and public policies are not evaluated. The economist Philippe Aghion proposes measures to stimulate the economy through democratic oversight. The lawyer William Bourdon explains why it is crucial that democracies implement more deterring sanctions.

Democratizing the Economy – Philippe Aghion

Philippe Aghion is a professor of economics at Harvard University. A specialist in growth and innovation, he has published L’Économie de la croissance [The Growth Economy] (Economica, 2010) and, with Alexandra Roulet, Repenser l’État. Pour une social-démocratie de l’innovation [Rethinking the State: For a Social Democracy of Innovation] (Seuil 2011).

Watch the video in French or read the translation of the interview’s transcript:

Video shot and edited by David Bornstein.

Democracy is a Valuable Good in its Own Right

The benefits of citizenship and democratic rights are goods, just as health, education, and culture are goods. Democracy also plays an economic role: an advanced democracy can be a good way to keep one’s economy competitive. Yet when it comes to corruption, freedom of the press, or the independence of the judicial system, France is much closer to Europe’s least developed countries than to northern European countries with strong growth rates and steady development. In fact, in these domains, France lags far behind.

Democracy is a good in itself for at least two reasons. The first is innovation: new companies and new ideas are born all the time. Without democracy, new ideas cannot happen. Democracy brings the imagination to power. Once ideas emerge, they must be given a chance to materialize. In a corrupt regime, the government favors already existing companies, making it hard for new companies to get started and new ideas to materialize. Materialization depends on fighting corruption.

There is a third reason: modern governments make targeted investments, emphasizing education, for instance, or sectors that generate growth and jobs. You can’t invest everywhere. To prevent targeting from becoming cronyism, democratic oversight is crucial. Yet at present democratic oversight is lacking. Prosecutors named directly by the executive branch make us look like a banana republic. Northern European countries do not go about things this way at all. France is also very far below standards in developing countries relating to the evaluation of public policy.

Three Reforms

Three reforms can be implemented to put an immediate end to these dangers. First, one could prohibit any business that owns a media company from being given public contracts. This would spell the end of companies likes Bouygues, which would have to choose between its media division and public contracts. You can’t have both. This measure could be adopted immediately. The second measure would be: no prosecutor could be nominated without the approval of the National Judicial Council (Conseil National de la Magistrature). This would ensure the judiciary’s independence. Third, one could create, for instance, independent committees, like a budget committee, to ensure that estimates are reasonable. More generally, one should allocate adequate means for evaluating public policy and create committees like those that exist in the United States, Canada, and northern Europe.

Punishing Corruption - William Bourdon

William Bourdon is a lawyer who belongs to the Paris bar. He is the founder of Sherpa, an association “dedicated to protecting and defending victims of economic crimes.”

Watch the video in French or read the translation of the interview’s transcript:

Video shot by David Bornstein.

Edited by Thomas Grillot.

The Cancer of Corruption

What is the great lesson of the revolts that led the Arab people to break free of despotism’s chains? It is that corruption is a cancer on the rule of law, democracy, and development. Regarding development, corruption is more a cause of pauperization in poor countries than in rich ones. But it is still a venom that can thoroughly poison a republic. In the first place, it contributes to the privatization of public space. It exacerbates the already historically low degree of trust between citizens and the people who are supposed to embody the public good in France and Europe. And it pushes those engaged in it to violate the separation of powers. When you’re corrupt or profit from your office, you have but one obsession: to safeguard your impunity. Invariably, Montesquieu turns in his grave: to a caricatural degree, judges are scorned and circumvented, as we have seen for the past few years under the presidency of Nicolas Sarkozy. Corruption in all forms is an extreme danger for democracy, which ultimately exacerbates problems of social cohesion, even though the latter is indispensable to promoting national unity and solidarity.

The View from Brussels

To fight this cancer, we must look to Europe. We must not lose sight of the need to prevent conflicts of interest and adopt legislation on a national scale, but this question must also be increasingly addressed at the European level. Why? First, because European decisions impact the lives of more than 300 million people. This has been understood by a generation of lobbyists: they have descended upon Brussels and are fully aware that they must delay, complicate, or block all public decision-making processes relating to financial regulation or environmental penal law. Yet there is no preventive oversight mechanism commensurate with the importance of the decisions that Brussels is likely to make. When people have conflicts of interests, it leads to controversy and rumors in Europe’s corridors of powers. But this is not enough: one day, corruption on a European scale will have to be tackled.

One example is the European agency that participates in the very complicated process of bringing medicine to the market. God knows how important this is today. It is known that this agency is staffed by individuals with close ties the pharmaceutical industry. If there are no declaratory obligations carrying the risk of penal sanction for participants in public decisions about bringing medicines to market, then the coast will be clear for pharmaceutical laboratories that have developed one of the most powerful lobbying machines operating on a planetary scale. Europe’s citizens will have to commit themselves to this task.

Truly Deterring Sanctions

Even so, the new rules that have been imposed in France represent a step forward, though a cautious and timid one that hardly meets the demands of our democratic age. Well-meaning though they might be, ethicists for the National Assembly lack adequate resources. Recommendations and oversight occur on paper. The institution is appealing. But it is really a rump institution, an alibi institution. Ethicists would need to have the option of appealing to the public prosecutor’s office to initiate investigations. But even if they are granted more authority, this is not enough. Ethicists and anti-corruption charters are already in place at CAC 40 companies. This has not prevented scandals from occurring. Oversight institutions often contribute to the perpetuation of fraudulent behavior.

The effectiveness of such measures ultimately depends on elected officials themselves. At present, they are still not subject to full declarations. They fill out their declarations on blank paper, writing down whatever their moral conscience dictates, with no oversight or risk of penal sanction. The essential point is this: one can make elected officials do whatever one wants. One can tell them: “if you have a stake in such-and-such a company, you must formally announce your holdings.” But as long as lying, omission, and duplicity pay, there will be people who are not necessarily major crooks who will play the game half way. This will have a deep effect on future public decisions, adding to the citizens’ loss of trust in public affairs.

Serious and deterring penal sanctions are necessary. Two years ago a largely unnoticed report appeared, which explained that environmental policy at the European level has no deterrent quality because the major polluting companies have incorporated expenses resulting from fines they have been condemned to pay into their overall financial strategies. The same is true of elected officials: sanctions must be genuinely deterring if they are to feel a real constraints, the constraint of truth. This is what citizens expect.

First published in laviedesidees.fr. Translated from French by Michael C. Behrent with the support of the Florence Gould Foundation. Transcribed by Stéphanie Mimouni.